How Fit Are Your Finances?

Has anyone else become desensitized to the gloom and doom that is reported daily about the state of the economy? Clearly there are huge issues facing the global economy which should concern each of us however as with anything else, when you see and hear the same thing over and over it becomes possible to just stop listening.

Unfortunately tuning out the news, skipping over the articles about the recession or otherwise putting your head in the sand will not change the reality of the current crisis. Instead of avoiding the news and hoping things will improve you have the option of taking control of one area of the economy, your own personal finances. Now would be an ideal time to gauge your own financial situation to determine how financially fit you are today.

Check your savings- Financial experts recommend having at least three to six months of living expenses in your savings account. I am not a financial expert therefore I will certainly not argue that advice, however if I may speak for the population that is living paycheck to paycheck without any savings to speak of, it might be a little tough to put that kind of money away. Tough- but not impossible.

The key to saving money even for families that are working with very limited funds is getting started. A few bucks each pay may not fit into the “standard” saving plan but the economy is anything but standard right now. If you already have a savings account and contribute regularly continue to do so and try to avoid situations that would require you dipping into your savings.

Check your credit score- Checking your credit report and credit score should be something that you get in the habit of doing at least once a year regardless of the economy. During a recession the importance of knowing your credit score becomes even more critical since obtaining credit may become difficult if not impossible as lenders scramble to reduce their risk. Add to that the current trend in the credit card industry of canceling dormant accounts and lowering credit limits you may discover your credit is taking a hit even if you have been financially responsible. By being informed you can actively work to repair or at least minimize the damage to your credit score.

Check your investments- Are you afraid to find out where your investments stand? Have you been avoiding checking your statements for fear of realizing how much you have lost? One thing is certain, not acknowledging the facts will not make them go away. Find out where you stand so you can make educated decisions about your investment goals for the upcoming year.

Check your taxes- Don’t worry they haven’t gone anywhere- but your tax planning strategy should be examined to make sure it is working properly. Are you claiming all eligible deductions, receiving applicable tax credits, paying too much money or too little throughout the year? Proper tax planning can take some of the guesswork out of tax season and ensure you won’t have any unwanted surprises when you file your tax return.

Check your retirement- Are you taking full advantage of retirement plans offered by your employer? Do not let the recent turn in the economy stop you from contributing to your retirement fund, especially if your employer offers a match. The best way to guarantee you outlive your retirement assets is by stopping contributions to your retirement account.

Check your insurance policies- You need to make sure all of your policies are still relevant and the information is correct so you can maintain the proper coverage. This applies to all types of insurance from homeowners to life insurance. People often have policies and forget about them -assuming they are covered. Life is not predictable and situations change, it is important to check your policies at least once a year to ensure you are not over/under insured.

Check your estate planning- There is an alarming number of Americans who do not have a will and many who have wills that haven’t been updated in years. First if you do not have a will you need to remedy that as soon as possible. Estate planning is not just for the retired or wealthy. If you do not have your wishes documented the state will determine how your assets get distributed when you pass away. Your will should include your last wishes, appointing a power of attorney, a living will in the event you are unable to make decisions regarding your health care and how you wish your estate to be distributed.

When your financial “checkup” is complete you can feel confident that you have allowed yourself the opportunity to update information, change strategies and confirm your current financial fitness before moving forward into the new year.

Trisha Wagner is a freelance writer for DepositAccounts.com, where you can compare rates from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and saving money.

Filed Under: advice • Budgeting